LCQ18: Special 100% Loan Guarantee
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Question:
Regarding the Special 100% Loan Guarantee (Special Loan), will the Government inform this Council:
(1) of the respective default rates of the 80% Guarantee Product, the 90% Guarantee Product and the Special 100% Guarantee Product under the Special Loan in each year since their establishment, and the latest loan guarantee amount of default cases undertaken by the authorities;
(2) whether it has compiled statistics on the number of companies involved in default cases under the Special Loan that have also applied for the Protection of Wages on Insolvency Fund (PWIF), and the percentage they account for; whether the authorities have investigated such cases of abuse of the Special Loan and PWIF, and whether they have studied measures to prevent abuse of the PWIF; if so, of the details; if not, the reasons for that;
(3) whether it has compiled statistics on the respective numbers of default cases and bankruptcy applications for relevant companies in the first month, the second to third months, the fourth to fifth months, and six months or more after they commenced repayment of the Special Loan; and
(4) regarding enterprises involved in default cases and bankruptcy, whether the authorities have investigated if such cases involved transfer of assets; if investigations were conducted, whether prosecutions have been instituted and of the details of the relevant cases; if not, the reasons for that?
Reply:
President,
The Government has been providing loan guarantees through the SME Financing Guarantee Scheme (SFGS) since 2012 to help small and medium enterprises obtain commercial loans, and kept on introducing enhancement measures to meet the financing needs of SMEs during economic downturn. The application period of the Special 100% Guarantee Product under the SFGS ended in end-March 2024.
Having consulted the Financial Services and the Treasury Bureau and the Labour Department (LD), the reply to the four parts of the question is as follows:
(1) The default rates and loan guarantee amounts of default cases of various guarantee products under the SFGS are calculated on a cumulative basis. As at end-August 2025, the cumulative loan guarantee amounts of default cases of the 80%, 90% and Special 100% Guarantee Products were about $5.4 billion, $1.2 billion and $25.5 billion respectively, and the cumulative default rates were about 5.4 per cent, 4.5 per cent and 17.7 per cent respectively, lower than the assumed overall default rates (12 per cent, 16 per cent and 25 per cent respectively). The default rates are subject to change having regard to the overall economic environment, and the operational situation of individual borrowing enterprises, etc. The Government and the HKMC Insurance Limited (HKMCI), which is responsible for administering and managing the SFGS, will continue to monitor the situation closely.
(2) Established under the Protection of Wages on Insolvency Ordinance (Cap. 380), the Protection of Wages on Insolvency Fund (PWIF) aims to provide timely financial relief in the form of ex gratia payment to employees in the event of business closure of their insolvent employers, which saves them from waiting for the completion of lengthy bankruptcy/winding-up proceedings of their employers to promptly recover arrears in wages, pay for untaken annual leave, pay for untaken statutory holidays, wages in lieu of notice and/or severance payment being owed. The Government takes a serious view on suspected abuses of the PWIF, and has set up an inter-departmental Task Force comprising representatives from the LD, the Commercial Crime Bureau of the Hong Kong Police Force (the Police) and the Official Receiver's Office (ORO) to strengthen proactive investigation of suspicious cases. The LD rigorously verifies and closely monitors every application to the PWIF. If the company responsible persons are suspected of illegal transfer of assets, theft of company money, evasion of liabilities by deception, failure to keep proper accounting records, etc., the LD will refer such cases to the Police and/or the ORO for follow-up. When processing the PWIF applications made by employees, the LD examines the employment and wages records of employees. Since the objectives and the beneficiaries of the PWIF and the SFGS are different, the LD does not need to consider whether the relevant employers are borrowing enterprises under the SFGS, while the lending institutions, during the course of taking recovery/legal actions against the borrowing enterprises, do not consider whether the employees of the borrowing enterprises are simultaneously taking actions against the enterprises to recover their wages and/or applying for the PWIF.
(3) As at end-August 2025, the cumulative number of delinquent cases calculated based on the time of occurrence of delinquency of borrowing enterprises is as follows:
| Time of occurrence of delinquency (calculated from the loan starting/drawdown date to the date of delinquency) |
80% Guarantee Product | 90% Guarantee Product | Special 100% Guarantee Product |
| (i) Not more than 180 days | 151 (6.5%) |
109 (9%) |
374 (3.1%) |
| (ii) 181 days to one year | 325 (14.0%) |
288 (23.8%) |
1 386 (11.7%) |
| (iii) More than one year | 1 843 (79.5%) |
812 (67.2%) |
10 120 (85.2%) |
| Total | 2 319 (100%) |
1 209 (100%) |
11 880 (100%) |
As at end-August 2025, in respect of the 80%/90% Guarantee Products and the Special 100% Guarantee Product, lending institutions have been taking recovery actions against 1 784 and 11 220 default cases respectively. Among them, bankruptcy proceedings have been commenced or bankruptcy orders had been granted by the court against the guarantors in 1 130 and 2 860 cases, and liquidation/other legal actions have been/are being taken in 1 162 and 2 454 cases respectively.
(4) The HKMCI has been working closely with lending institutions on properly handling delinquent cases. In the event that a borrowing enterprise defaults on repayments, the lending institution will first discuss a feasible repayment plan with the borrowing enterprise, e.g. repaying only the interest or part of the principal during a transition period, so that the borrowing enterprise can continue its operation while making a debt restructuring arrangement as soon as possible, with a view to gradually resuming normal repayments. At the same time, lending institutions will review the asset status of the borrowing enterprises and the guarantors. If the lending institution and the borrowing enterprise could not reach agreement on the repayment or the latter refuses to co-operate, or transfer of assets are identified, the lending institution will consider taking appropriate recovery/legal actions in accordance with its policy and prevailing commercial practice, including requesting the enterprise and guarantor to repay the loan, applying to the court for an order and other follow-up actions (e.g. apply to the court for charging orders to prevent enterprises or guarantors from evading repayment obligations by transferring real estate properties), filing a petition for winding-up and/or bankruptcy with the court, etc. with a view to reducing the loss of the Government.
The existing statutory procedures and relevant legislation in respect of bankruptcy and winding-up proceedings have provided effective safeguards against fraudulent transfer of assets by debtors and debtor companies. Regardless of whether a case involves defaults under the SFGS, such fraudulent acts are in breach of the Bankruptcy Ordinance (Cap. 6) or the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).
In bankruptcy and winding-up cases, the trustees and liquidators responsible for case administration will investigate the affairs of the debtors and debtor companies, including whether there were any unfair preferences given, transactions at an undervalue or improper disposals of assets prior to the bankruptcy or winding-up. In cases of improper disposals of assets, appropriate actions will be taken by the trustees and liquidators to recover the relevant assets. Under the Bankruptcy Ordinance and the Companies (Winding Up and Miscellaneous Provisions) Ordinance, where the trustees or liquidators discover that a debtor or an officer of a debtor company is suspected of having fraudulently transferred any property, they shall provide the ORO with the relevant evidence for consideration and follow-up. If sufficient evidence is available, the debtor or the officer of the debtor company will be prosecuted in accordance with the relevant ordinance, and upon conviction, is liable to imprisonment for up to two years.
Ends/Thursday, September 25, 2025
Issued at HKT 14:50
Issued at HKT 14:50
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